WEALTH at work recently conducted a survey to investigate what has changed in the workplace since the introduction of the pension changes. Its aim was to understand the attitudes and opinions of a range of UK companies in recognising the need to support their employees as they approach retirement.
Employees set to fail from the start
The survey results show that only 10% of employers believe their employees are saving enough for their retirement.
Jonathan Watts-Lay, director, WEALTH at work, said: “I fear that employees are set to fail from the start when it comes to generating sufficient pension savings. With contribution rates for auto-enrolment set so low, I believe that there is still a long way to go until we are at a stage where the majority of employees are producing sufficient pension savings for financial security in retirement.”
Survey results also reveal that 39% of employers will still default employees to an annuity tracked glide path if no active choice is made, this is despite a significant fall in annuity purchase since the pension freedoms took effect.
Watts-Lay added: “In this new world of freedom and choice in pensions an annuity tracked glide path might not be the most suitable option, leaving many on an investment route that doesn’t match their retirement plans.
“This is putting employees at a major disadvantage and could potentially result in a reduced income in retirement with severe consequences for some. It is crucial that employers provide financial education about the different glide path options available so that employees are armed with the facts to make suitable decisions.”
Employees abandoned at retirement
Survey results reveal that almost half (48%) of employers believe that their employees are not aware of the various retirement income options available to them at retirement.
Watts-Lay said: “Without even a basic level of understanding of their options, it is hard to see how employees can secure a good retirement income outcome.”
In addition, the survey results reveal that more than half (55%) of employers either provide no support, or information only for employees at retirement; with only 20% of employers providing a full retirement income service for employees at retirement.
Watts-Lay said: “It’s clear that many employees are simply abandoned at retirement and are left incredibly vulnerable to making poor decisions due to the lack of support available, or worse still being scammed by ‘an offer too good to ignore’. Financial support at this point must be made a priority given the enormity of the decisions that employees face at this stage of their life.
“This doesn’t have to be the case as there are providers who can deliver a full service; from financial education and guidance, supported by regulated advice and then ensuring the appropriate service provision is available to implement all options at retirement – whether that is an annuity, drawdown, a cash withdrawal, or indeed a combination of options over time.”